The future for mobile payments

Can Apple and Samsung fight back against the stores?

Christmas is coming, the geese are getting fat, please put some money on my mobile app...

OK, we may not be ready to ditch the traditional Christmas rhyme just yet but we’re certainly getting ready to ditch our more traditional ways of paying for Christmas.

For the past couple of decades, the arrival of the holiday season has meant that we all hit the shops, with plastic cards in our hands, waiting for the inevitable come-down when the bills hit in January.

But are things changing? More people are using their mobiles to make payments – particularly young people - and what will that mean for shopping habits?

According to a recent survey from Visa, the way that this younger generation are using their mobiles is an indication of things to come. The research found that nearly two-thirds of millennials have used their phones to send money to a friend or member of their family.

That figure ties in with Visa’s figures for mobile banking: the card company found that 69% of people between 18 and 34 have used a mobile banking app, with more than half of these doing so regularly. It’s a world where mobiles are being used more in other ways, so finance is going to be one of them.

We’re still a long way from universal acceptance but some countries are leading the way. The Nordic countries are particularly advanced in this regard: a survey this week from Deloitte showed just how advanced they are. According to Deloitte, a quarter of Norwegians have paid for public transport with their mobiles, while a third of Swedes and Danes have made in-store payments with their phones. And that’s across the population as a whole, not just among the mobile-obsessed young but all generations of Scandinavians.

But even in the Nordic countries, there’s still resistance to the idea of paying with their mobiles. There are several excuses being offered: concerns about security and not having the right apps are prominent ones but the main one being offered is probably the reason that will really slow down take-up: what’s the benefit?

It’s easy to see why this could be a limiting factor. You already have a bank card, so it’s probably contactless, so it’s pretty easy to make a payment. Why should you go to the effort of downloading a payment app – taking up storage space on your phone - shrug off security concerns and make a payment that could easily be made by waving your card? It’s nice and gimmicky to be paying by phone but gimmicks don’t make a long term business case.

The other issue faced by mobile phone users is that not all stores accept mobile payments. There are still large numbers of shops out there who don’t accept card payments, so it’s stretching the imagination to think there are going to be terminals ready to accept mobile payments in every high street – it may happen in Gothenburg or Tromsø, but is not likely to be seen in Gravesend or Truro, any time now.

Walmart pay

But a development in the US this week, showed how mobile payments could pan out – and it’s not good news for the likes of Apple and Samsung.

According to a Bloomberg report, Walmart executive Daniel Eckert said that the store’s own mobile pay technology would shortly surpass Apple Pay in terms of transactions. According to Bloomberg, Eckert claimed that the company was signing tens of thousands new users every day, a big increase from just a few months ago, and that those customers were generally happy to use the service a second time, shortly afterwards.

Given the dominance of Walmart stores in the US, it’s easy to see why the company is optimistic about the future. The mobile pay service was only launched in December 2015, so it’s done well to catch up with Apple in that time.

And stores will start cottoning on to the advantages of mobile payments after a while. We do they want to give Apple and Samsung an advantage here? By tying in customers to their own pay technology, the likes of Walmart can entice punters back. The retailers will have access to what they’ve been buying. They will have access to what they’ve been browsing and, as they get more sophisticated with their analytics, they can start pushing personalised deals out at those customers who was using their pay technology.

What’s the benefit for me? asked those Nordic customers. Well, special offers and tailored deals could provide some great incentives. And they can pull in the sort of data that the mobile phone vendors can’t. Walmart will know what you’ve been buying whether it’s been done online or in person. Whether you’ve been paying by cash, card or mobile phone: Apple won’t have that much data to hand.

Are we seeing the last throes of mobile payment models, just as it’s beginning to make some headway into the market? I wouldn’t be too sure of that – Apple in particular is very adept at giving customers what they want, but I’m sure we’ll see a change of approach shortly. It won’t be enough to offer payment by mobile as an option; a customer would need to have a reason to pay that way – a very good reason.

If heavy mobile users like Scandinavians are expressing reservations, you know that the more resistant Brits and Americans will have some concerns. It’s going to be interesting to see how the technology changes over the coming years.